1 hour ago
There are two (2) different meanings when we talk about GROSS versus NET.
1) For Businesses
2) For Wage Earners
Focusing on businesses: whether you’re running a business, or investing in one, knowing the difference between the two is an important foundational concept to understanding how your or a business is ran.
GROSS income tells the story of revenue the business generates minus the cost of goods sold (COGS). More so operational than anything.
NET income - or profit - tells the story of how profitable your business is or the business you’re investing in. This is total revenue minus total expenses.
Example: if a company has $1,500,000 in revenue and the COGS = $500,000 👉🏾 their Gross Income is $1,000,000.
The Net Income would have to take out labor costs, marketing, travel, etc. so we could say all expenses come out to $650,000 leaving us with a $350,000 net income.
Can you tell me what the profit MARGIN is on that? Expressed as a percentage. Hint: we’ve gone over this in a previous post
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